FAR 75 - Typical Items and Specific Types of Transactions and Events 2 Flashcards Preview

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Flashcards in FAR 75 - Typical Items and Specific Types of Transactions and Events 2 Deck (16):

Fixed assets donated to a governmental unit should be recorded:
A. As a memorandum entry only.
B. At the donor's carrying amount.
C. At estimated fair value when received.
D. At the lower of donor's carrying amount or estimated fair value when received.

C. Donated fixed assets should be recorded in the fund to which they relate or in the General Fixed Asset Account group, as appropriate, at their estimated fair value when received. GASB 1400.113


Chase City imposes a 2% tax on hotel charges. Revenues from this tax will be used to promote tourism in the city.

Chase should record this tax as what type of Non-Exchange Transaction?
A. Derived Tax Revenue.
B. Imposed Non-exchange Revenue.
C. Government-Mandated Transaction.
D. Voluntary Non-Exchange Transaction.

A. GASB Stmt. #33 defines derived tax revenues as Non-exchange Revenues that are based on (or derived from) Exchange Transactions. Other examples of derived non-Exchange Transactions include sales taxes and income taxes.


Which account should Excel City credit when it issues a purchase order for supplies?
A. Appropriations control.
B. Encumbrance Control.
C. Vouchers Payable.
D. Budgetary Fund Balance.

D. The entry to record a purchase order is a debit Encumbrances and a credit to Budgetary Fund Balance.


What is the major difference between an Exchange Transaction and a non-Exchange Transaction for governmental units?
A. The relationship between the amount of value given and received.
B. Time requirements and whether the transaction is required by law.
C. Purpose restrictions placed upon fund balances.
D. Whether resources acquired can be further exchanged.

A. Exchange Transactions involve a direct relationship between the charge and the service. Non-exchange Transactions, which are frequent in governments, do not have this relationship (e.g., taxes and fines).


T/F: Activity is a characteristic that identifies the period of time benefited by the expenditure.

Activity is a characteristic that defines a specific goal or objective under a program.
Character is a characteristic that identifies the period of time benefited by the expenditure.


T/F: Derived tax revenues are taxes resulting from the taxable exchange transactions of individuals and businesses.



T/F: All eligibility requirements or government mandated and voluntary non-exchange transactions must have been met before both assets and revenue can be recognized.



T/F: Government-mandated non-exchange transactions are intergovernmental transfers of resources including entitlements, shared revenues, and payments in lieu of taxes.



T/F: GASB #33 provides a comprehensive basis for recognizing non-exchange revenues such as property taxes, sales taxes, and shared revenues. Entitlements and grants are not included in GASB #33.

GASB #33 includes all revenues listed. Accounting and Financial Reporting for Non-exchange transactions.


T/F: If revenue cannot be recognized under modified accrual basis as well as under GASB #33, then the transaction is recognized as deferred revenue.



T/F: Imposed non-exchange revenues are government assessed amounts billed and charged to individuals and businesses, such as property taxes and delinquent property taxes.



In January 2010, Red County acquired the right to draw water from a lake on the property of a privately owned ranch in exchange for a cash payment of $20 million. The annual volume of water that can be drawn is unlimited. The county's rights under the contract expire in 10 years (2020); however, the contact provides the opportunity to renew the water rights for an additional 10 years (to 2030) for no additional payment, subject to the mutual agreement of the two parties. The county believes that it will request the renewal. The county expects the other party to agree to the renewal since the ranch is a significant user of the county's water supply and is a major employer of Red County residents. The county operates on a calendar fiscal year. The county should recognize in its 2010 Government-Wide Financial Statements:
A. $20 million expense in its Statement of Activities.
B. $10 million expense in its Statement of Activities.
C. $2 million amortization expense in its Statement of Activities.
D. $1 million amortization expense in its Statement of Activities.

D. The county would recognize in its Government-Wide Statement of Net Position a capital asset of $20 million for the acquisition of the water rights in 2010. A capital outlay expenditure of $20 million would be recorded in the county's Capital Projects Fund Statement of Revenues, Expenditures, and Changes in Net Position. Since there is evidence that the county will seek and be able to acquire renewal of the water rights without incurring additional outlays, the useful life of the water rights is 20 years-the original 10 year term plus the 10 year renewal term. Using straight-line amortization, annual amortization expense of $1 million ($20 million over 20 years) would be recorded in the county's Government-Wide Statement of Activities, starting in 2010.


Which of the following is not one of the five information classification sections that must be included in the Statistical Section of the CAFR?
A. Operating information.
B. Demographics information.
C. Revenue Capacity information.
D. Fund Balance information.

D. GASB Statement No. 44 requires that statistical information be presented in five categories - Financial Trends Information, Revenue Capacity Information, Debt Capacity Information, Demographic and Economic Information, and Operating Information. Fund balance information is not one of the five categories, but for Governmental Funds, Fund Balance Information is required as part of the financial trends information category.


A government has an investment derivative instrument that is considered effective. The fair value of this derivative instrument has increased by $100,000 in the current period. The change in fair value should be reported as:
A. Investment Revenue in the Statement of Activities.
B. Deferred Credit in the Statement of Net Position.
C. Holding Gain in Fund Balance.
D. Should not be reported.

A. GASB Statement No. 53 requires changes in the fair value of Derivative Instruments used for investment purposes to be reported within the Investment Income classification of the Statement of Activities. Changes in the fair value of Hedging Derivative Instruments are reported as Deferred Outflow or Deferred Inflow of Resources in the Statement of Net Position.


T/F: Taylor County was recently named in a lawsuit that seeks to recover $500,000 in pollution remediation costs related to drainage problems on the County's right of ways. The County attorneys feel that it is likely that the County will lose the lawsuit and have to cover the full amount of these costs. The County must report a $500,000 expense related to these costs in its current period Government-wide Financial Statements.



T/F: The actuarially determined other postemployment benefit or obligation is disclosed in the Schedule of Funding Progress, which is included in the Notes to the Financial Statements.

The required supplementary information includes the Schedule of Funding Progress along with the Schedule of Employer Contributions. Both schedules use actuarial calculations to determine the value of plan assets, as well as the plan liability.

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